Scheduling free N95 masks could save domestic mask makers — or kill them
The Biden administration’s plan to distribute 400 million high-quality N95 respirators (N95 masks) in thousands of pharmacies, free of charge, is a great way to encourage people to upgrade to a much higher level of protection against COVID-19. These masks will come from the government’s National Strategic Stock.
If we can get the American public to pick them up and use them, it will help reduce the transmission of omicron and other future variants. But we should wonder what this will mean for domestic mask makers. After all, competing with “free” is tough even in good times. But if the plan is to replenish stock by sourcing from domestic manufacturers, this is an opportunity to correct some mistakes we made earlier in the pandemic.
N95 masks provide the highest level of filtration. They excel in both fit and filtration capabilities. According to the Pandemic Response Task Force of the American Conference of Governmental Industrial Hygienists (ACGIH), it takes 25 hours for an infectious dose of COVID-19 virus to be transmitted between two people wearing untested N95 masks. If the masks fit snugly (i.e. tightly sealed to the face), wearers have 2,500 hours of protection. It compares to one hour protection for two people wearing disposable surgical masks, 27 minutes for two people wearing cloth masks, or 15 minutes for two people wearing no mask at all.
Hey leaders in Washington, cloth masks really aren’t good enough — at all. So we need to see you setting a good example at press briefings and on C-SPAN!
When the pandemic first hit the United States in March 2020, the country was taken aback by soaring demand for frontline healthcare workers. We discouraged others from using them because we didn’t want to strain the supply chain; we wanted priority to go to those who needed it most. The shortages have even forced many healthcare workers to reuse masks much longer than expected or attempt to repackage them for reuse. We must not forget those desperate days.
Public and private sector leaders have pleaded with domestic companies to start production, and many have stepped up their efforts. But as My colleagues and I have emphasized, much of the supply and capacity base that would facilitate the start of automated mask production left this country some time ago. As domestic sources surged for large volumes, Chinese manufacturers flooded the market with a wide range of face masks and personal protective equipment (PPE), often priced below the cost of raw materials paid by American companies.
A large part of the masks and PPE consumed in this country and intended for the health market are purchased and distributed by purchasing groups (GPO). They are often sourced from major healthcare supply manufacturers who negotiate supply agreements with them. Taking advantage of severe shortages, major manufacturers were in a good position to sign long-term contracts, and they did. As a buyer, if you were faced with shortages, you would probably jump at the chance. Public markets followed the same path.
This left the consumer market to small domestic manufacturers who had entered the business in response to urgent calls for help. Many of them started selling direct to consumers to stay alive. But they struggled as Centers for Disease Control and Prevention (CDC) guidelines continued to steer consumers away from N95 masks, while Facebook, google and Amazon followed CDC guidelines to block online advertising of N95s to the general public. Imagine you’re trying to sell online and you can’t advertise online. Hmmm… That doesn’t sound like a winning proposition. Meanwhile, Chinese-made KN95 masks have flooded the market.
Many of these national companies have struggled to survive and have laid off most of their employees or shut down completely. Some rebounded to meet renewed demand with the emergence of the omicron variant, just as shortages developed again.
Will “free” masks stop these sales? The first signs are not good. United States in Texas saw sales plummet nearly 50% overnight after the announcement of the free mask, and Shawmut Advanced Materials in Massachusetts has seen sales drop 60-70% in the past two days. Even Premier, one of the largest GPOs, expressed concerns on the free mask program.
The US Department of Health and Human Services (HHS) has developed a contract plan for a surge capacity (120 day response) of N95141 million per month. These would be structured as 10-year agreements that would commit to buying a certain percentage on a regular basis to ensure they would be available for the next crisis. It’s a good idea.
However, one vendor I spoke with said HHS only wanted to work with two or three companies for high-volume proposals. They told me their company would be able to produce over 200 million N95 masks in the next 12 months – but that apparently wasn’t enough, so they were cut. HHS seems to have reconsidered, so the company hasn’t given up.
Since supply chain resilience is what we really need in this country, here are some steps we should take. First, we should diversify the supply base, encouraging more manufacturers, especially those with domestic sourcing for their raw materials. Eliminating masks from materials of foreign origin will not make us more resilient in the next crisis. It also probably means more than two or three big suppliers, because a broader base will produce more innovation. Maybe we should research any sites that mayors, governors, or congressional leaders have called for help or visited to dedicate new mask manufacturing lines, and see if we can direct business to these companies. After all, they stepped in during our time of need, and many of them invested their own money with little or no federal assistance.
Second, we must make long-term commitments to these suppliers. US companies will have higher costs than their overseas competitors and buying from them for inventory is a good way to ensure they can have stable demand. Large manufacturers already have a stable base, and inventory purchases from smaller producers will promote supply diversity and better resilience. Stable demand helps them maximize efficiency and keep people employed. At the start of the pandemic, we asked these companies to be swing producers. But we can’t expect them to stay in business as swing producers – called in only when needed – not if we want them to stay in business.
Finally, we should find ways to help small domestic suppliers navigate their way through government procurement regulations. We should find ways to help them and say ‘yes’ rather than just ‘no’.
Giving masks to the American public will be a very good initiative to improve public health, and rebuilding the national strategic stockpile is a good way to develop a resilient national supply chain. It is also an opportunity to thank the companies that mobilized earlier in the pandemic. Let’s not miss this opportunity.
Willy C.Shih is the Robert and Jane Cizik Professor of Management Practices at Harvard Business School. His research focuses on global manufacturing and supply chains. Follow him on Twitter: @WillyShih_atHBS
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